Legalise cannabis campaigners in Golden Gate Park in San Francisco, California. The drug will become legal for recreational use in the state on 1 January 2018.
Photograph: Robert Galbraith/Reuters

While Arctic conditions gripped America’s north-east, balmy sunshine bathed Los Angeles last week – but that was not the only reason denizens of the Venice boardwalk were feeling mellow. An astringent, earthy aroma infused the Pacific zephyrs wafting through the buskers, joggers, skateboarders, tourists and panhandlers.

“Weed is part of the culture here,” said Oni Farley, 30, perched on a sandy mound, watching life go by. “It’s part of the LA/California scene, the laid-back vibe.” He ignored a police patrol car that inched through the throng. “I’ve blazed in front of cops and they don’t say anything. To be honest, most of the time I’m so high I don’t notice them.”

Pot wasn’t hiding. In multiple different ways it was on display.

“Addicted to weed, anything green helps,” said a scrawled sign tilted against the backpack of Alexander Harth, 36, a dusty member of the boardwalk’s homeless population.

On the pavement, Marc Patsiner hawked wooden ornaments etched with Californian symbols: sunglasses, palm trees and marijuana leaves. “It’s pretty bohemian out here. People associate us with the leaf.”

On Monday, California, the US’s most populous state, and the world’s sixth biggest economy, will officially “hit it” by legalising cannabis.

There’s going to be a lot of people making money and people will want to tax those dollars. This is going to spread

Philip Wolf, cannabis entrepreneur

Think Amsterdam, but sunnier and vaster – a watershed event for the legalisation movement. Overnight a shadow industry worth billions of dollars annually will emerge into the light, taking its place alongside agriculture, pharmaceuticals, aerospace and other sectors that are regulated and taxed.

It will answer to the newly created Bureau of Cannabis Control – bureaucratic confirmation that a day many activists did not dare dream of has indeed come to pass.

A product pilloried in the 1936 film Reefer Madness will become culturally normalised and economically integrated, said Philip Wolf, an entrepreneur who runs a cannabis wedding company and a firm that pairs pot with gourmet food. “It’s going to help destigmatise the plant. There’s going to be a lot of people making money and people will want to tax those dollars. This is going to spread. California is a trend-setting state.”

California legalised pot for medicinal purposes in 1996, ushering in a web of dispensaries, spin-off businesses and creeping mainstream acceptance. That culminated in voters last year approving proposition 64, a ballot initiative which legalised pot sales for recreation. History will mark the date it came into effect: 1 January 2018.

It is expected to unleash profound changes across the state. The Salinas Valley, an agricultural zone south of San Francisco nicknamed America’s salad bowl, has already earned a new moniker: America’s cannabis bucket. Silicon Valley investors and other moneyed folk are hoping to mint fortunes by developing technology to cultivate, transport, store and sell weed. Entrepreneurs are devising pot-related products and services. Financiers are exploring ways to fold the revenue – estimated at $7bn per annum by 2020 – into corporate banking.

Customers at MedMen, a medical marijuana dispensary in Los Angeles. Use of the drug to ease pain and disease has already been decriminalised in California. Photograph: Richard Vogel/AP

California is not the trailblazer. Colorado grabbed that mantle in January 2014 when it became the first jurisdiction in the world – beating Washington state and Uruguay by months – to legalise recreational cannabis sales. California is one of 29 US states where pot is legal for medical or recreational use. With medical certificates you can criss-cross the country getting legally stoned.

But cultural, political and economic heft makes California a landmark in the global legalisation campaign. This is the state that incubated the political careers of Richard Nixon, who launched the war on drugs in 1971, and Ronald Reagan, who continued hardline prohibition policies under his wife Nancy’s slogan “just say no”.

California’s path to yes wound through Venice, a gritty beachside haven for beat poets, artists and musicians long before hippies wore flowers on their way to San Francisco. The Doors, among others, kept the counterculture torch lit in Venice: here they wrote Light My Fire, Moonlight Drive and Break on Through. A giant mural of a shirtless Jim Morrison still peers down from a wall. It was in Venice that generations of Angelenos and tourists toked illicit spliffs. They still do, though it is now a gentrifying tech enclave.

Cultural, political and economic heft makes California a landmark in the global legalisation campaign

When California legalised pot for medicinal purposes many cities and neighbourhoods refused to issue licenses for pot dispensaries. In Venice they popped up like toast, as did “clinics” where for a fee ranging from around $20 to $40 doctors issued pot recommendation letters to ostensible patients. Some were genuine, with ailments and pain alleviated by the herb. Many just wanted to get high. “Pretending you have an affliction just to smoke, that’s ridiculous,” said Farley, the boardwalk observer. Having served in the navy, he claimed to have post-traumatic stress disorder. “I don’t, but that’s what I said.”

The California Alternative Caregivers’ dispensary set up shop in 2005 on Lincoln Boulevard, on the second floor of a maze of little shops and offices. “It was by design, upstairs, all the way to the back. We didn’t advertise,” said the manager, Jim Harrison, 46. Pot, medicinal or not, still needed to be discreet. If asked about his profession Harrison would say he was a healthcare professional.

The sky failed to fall in on Venice, or other areas with dispensaries, and little by little pot became more mainstream, even respectable. Harrison, who wears a white coat and calls his patrons patients, is proud that his dispensary’s protocols, such as sealing and labelling bags and containers, have been replicated in the new state regulations for recreational pot.

Full legalisation feels historic, he said. “It’s pretty amazing. The cat’s out of the bag.” His dispensary will create a new space for recreation customers and keep a separate room for patients. Tax on medicinal pot is lower so dispensaries expect that market segment to dwindle but not disappear.

The new era may begin with a whimper. State authorities have given counties and cities authority and responsibility to govern the new industry. The result is a patchwork. Some places, such as Kern county, are still banning all commercial pot activity. LA and San Francisco only recently approved local regulations so it could be weeks or months before newly licensed pot shops start sprouting. Oakland, Santa Cruz and San Diego have licensed operators ready to open on Monday.

Golden State Greens ‘budtender’ Olivia Vugrin (right), serves a customer in San Diego, California. Dozens of shops in the state will be selling marijuana for recreational use from tomorrow. Photograph: Elliot Spagat/AP

Donald Trump’s administration casts a shadow because pot remains illegal under federal law. The attorney general, Jeff Sessions, has compared the herb to heroin and threatened a crackdown. Fearful of federal prosecution, banks are shunning pot businesses, leaving the industry stuck with mounds of cash which must be transported under armed guard.

Venice’s bohemians helped pave the way to California’s big experiment but it is another California, that of boardrooms and city halls, which stands to gain.

State authorities have given counties and cities authority to govern the new industry. The result is a patchwork

Based on Colorado’s experience politicians across the Golden State are expecting tax windfalls. Labour unions are hoping to recruit tens of thousands of workers to cultivate and sell pot.

Wealthy investors are snapping up land in Salinas and other cultivation areas with a view to mass production. Others are forming pot-focused business accelerators and management firms. Start-ups are devising new apps, products and services.

Corporate expansion felt a world away from the patch of sand that Harth, the Venice panhandler, called home. Despite the sunshine drawing big crowds to the boardwalk he stuffed his sign – “Addicted to weed, anything green helps” – into his backpack. The dollars weren’t coming.